401K's?

[PamsPride]

Has anyone ever just cashed out their 401K's?? Is it hard? Do you HAVE to claim/prove some kind of hardship?
I know you have to pay a bunch in taxes and that is ok with me.
My DH lost his job and he had a little bit in 401K left from that company and we were thinking about taking it out and paying down our morgage.
Any advice?

 

[andehens]

I lost so much of mine I just cashed out. No it wasn't hard, nobody asked why, I did have to pay taxes, federal and state. You can choose the rate, the min is 10 %, just like regular wages. I have heard of several people cashing out and applying it to their mortgage.
My husband still has his and hes calling it his 1k.

 

[PamsPride]

His 1K! HAHA!!
Ours is already half of what it was a 2 years ago! I think I am of the mind that I would rather pay some of it in taxes (tax guy already told us how much) than to lose ALL of it in the stock market!

 

[Big Daddy]

You could switch it in to a safe fund instead of paying the 10% penalty and all the taxes. I switched mine last July so it's still ok. Only makes about 2% because it's in treasury bonds. I'll switch it back when the market comes back. You might be able to get a loan against it. You pay the money back with interest to your 401k. Don't know if you can still do that if the job is gone.

 

[reinbeau]

You're going to pay a 10% penalty and the income taxes due on it. Think long and hard, you'll lose quite a chunk of it by cashing it in early.

 

[Tallman]

Borrowing from your 401k is generally not a good idea.

Let's say that you borrow $10,000 from your 401k. In order to pay it back, you have to earn the $10,000 plus tax in order to have the $10,000 free and clear to replace that which you borrowed. So you will have to earn $13,000 or so. Let's say you do this. Now this $10,000 is back in your 401k, and everything is great until you take it out. When you take it out during retirement, you will pay tax on it again!

 

[andehens]

His 1K! HAHA!!
Ours is already half of what it was a 2 years ago! I think I am of the mind that I would rather pay some of it in taxes (tax guy already told us how much) than to lose ALL of it in the stock market!

Thats the way I felt too.......... I didn't pay a penalty, only taxes. I will say, that all the advice I received was to leave it alone and not cash out. Its a hard decision.

 

[gettinaclue]

I cashed mine in, paid only taxes, we did have to claim hardship - and at the time it was no lie.

We saw no use in watching it drop like a stone and lose everything we put in it.

 

[PamsPride]

I cashed mine in, paid only taxes, we did have to claim hardship - and at the time it was no lie.

We saw no use in watching it drop like a stone and lose everything we put in it.

Did you have to prove a hardship or did you just have to 'say' hardship?

 

[gettinaclue]

We had to say hardship and describe what the hardship was - ie. I had just lost my job.

No supporting documentation was required.